Driven to Succeed in Car Rental Business
Tom McDonnell looked out the window at his competition across the street and praised them.
“Enterprise [Rent-A-Car] is the best thing to happen to us,” said the 35-year-old owner of U-Save Auto Rental, a $115-million-a-year chain based in Hanover, Md. “They will grow the market. Our whole strategy is to coexist.”
On McDonnell’s desk, however, is a photograph of the Enterprise lot that belies his soft spin. Someone has scrawled “The Enemy” on it.
Enterprise is the largest car rental company in the United States and commands more than half of the $6-billion “neighborhood” market, according to Auto Rental News, a trade publication based in Torrance.
U-Save holds less than 2% of that market, which includes non-airport rentals such as replacement cars for repairs, recreation rentals and short-term business fleet additions.
McDonnell, a Mississippi stock broker who commutes to Maryland weekly from his home in Jackson, bought U-Save last November. He wants to increase his company’s share to 25% of the market in five years. And with 430 franchise locations in 46 states, Canada and Jordan, he may have the tools and attitude to pull it off.
“There’s no rocket science or magic formula that we use to compete with Enterprise,” he said. “It’s doing a lot of little things correctly--like having the discipline to make a certain number of sales calls every day.”
The son of a truck driver, McDonnell started sharpening his business skills while still a teenager, after inheriting a few thousand dollars’ worth of stock from his grandfather.
He went to the University of Southern Mississippi to study business administration. But after his freshman year, he had doubts about continuing.
“My dad said, ‘Work with me and you’ll see what it’s like without a college degree,’ ” McDonnell recalled. “It was the best thing my dad ever did for me.”
With no more doubts, McDonnell got a broker’s license while still in school and began selling stocks soon after graduation. At age 28, he founded Private Investment Management Inc., the investment firm he still runs.
To diversify, McDonnell bought two limousines and used them as the starting point for six transportation companies that offer limousine service and also have state contracts to ferry the disabled and elderly around Mississippi.
Looking for more in 1994, McDonnell and his sister-in-law bought the Jackson franchise of U-Save. Then, frustrated by the lack of marketing support from the owners, he and a cousin bought the entire company.
“I’ve always been confident in my abilities,” McDonnell said. “I had a firm belief based on what I saw as a franchisee that I really needed to do something.”
Jon LeSage, executive editor of Auto Rental, is not sure U-Save can afford to buy enough cars and companies to reach its goal of 25% of the market, but he admits you never know.
“They’re a pretty strong little company, and [McDonnell] seems like the right kind of person to be taking over,” LeSage said. “There’s a lot of business to be had. You have to be tough though. Enterprise is not going to give you anything.”
Enterprise declined to comment on U-Save.
McDonnell thinks his company’s franchise system gives him an advantage over Enterprise, with its 3,100 corporate-owned locations.
“The locally owned operation will always beat a corporate-owned operation. They are much more motivated to grow the business and watch the pennies,” McDonnell said.
Ken Cook, who has owned a U-Save franchise in Rock Hill, S.C., for 17 of the company’s 19 years, agrees. He fought back when Enterprise opened a site a block away in 1988.
He said the rival nearly put him out of business, but “I learned to look at what they were doing better than I was doing, such as improving customer relations I was taking for granted.”
Cook has doubled his business since the arrival of Enterprise.
Besides healthy competition, another benefit Enterprise provides is its castoff cars, which U-Save buys.
“We buy primarily 1-year-old vehicles with mileage in the teens,” McDonnell said. “They take a big depreciation hit, and we run them for a year or two.”
McDonnell, whose wife, Jana, is director of business affairs at the University of Mississippi School of Nursing, plans eventually to move the company headquarters from Hanover, eight miles southwest of Baltimore, to Jackson, so that he can spend more time with his two daughters.
His role model is Bernard Ebbers, the chief executive of Jackson-based WorldCom Inc. The telecommunications company is merging with MCI Communications Corp. in a $37-billion transaction. Ebbers, who built the company from all but nothing, had been a high school basketball coach who also spent time selling cars and renting motel rooms.
“He proved that you can base a company in Mississippi and attract good-quality people,” McDonnell said. “If I can do one-tenth what Bernie has done . . . “
